Erskine Bowles ’69, cochair of the National Commission on Fiscal Responsibility and Reform, addressed a capacity crowd of Columbia Business School students, faculty members, alumni, and industry professionals at the Inaugural Program for Financial Studies Conference, “Finance in a World of Uncertainties.”
“Our deficits are like a cancer and will destroy the country from within if we don’t do something relatively quickly,” Bowles said in his keynote address, adding that legislators should have seen these fiscal challenges coming. “We face the most predictable economic crisis in history.”
Bowles cited four main causes of the current $14.9 trillion budget deficit: continually rising healthcare costs, continually increasing national defense spending, growing interest on the deficit, and the proliferation of loopholes and deductions in US tax code. “We have the most inefficient, ineffective, anti-competition tax code that man could ever dream up,” Bowles said.
While Republicans and Democrats generally address one or two of these issues in proposed fixes, Bowles said, the commission’s plan touches on all four causes. Their first goal: “don’t do anything overtly stupid,” he said. “We didn’t want to disrupt a fragile economic recovery … [and] we didn’t want to do anything to hurt the truly disadvantaged.” This means no cuts to food stamp or workers’ compensation programs, among others. The plan does include defense cuts, tax code revisions, and prioritized investments in education, technology, and “high-value-added research,” Bowles said.
Following stalled talks with the Obama administration earlier this year, Bowles recently revisited the plan with a bipartisan congressional committee. During the conference, he emphasized the need for legislators to find a solution as soon as possible.
“The gap between the haves and have-nots is immeasurably large. Poverty is at its highest rate in 52 years. We’re in a structural contraction that will lead to a continued period of low growth and high employment. No wonder we have people occupying Wall Street,” Bowles said. “The partisan divide is causing us to put off dealing with these problems, but our generation can’t afford to leave them for the next generation.”
Beginning in 1993, Bowles served in President Bill Clinton’s administration as deputy chief of staff and later, chief of staff. He also served on the National Security Council and National Economic Council. Working with Congress and President Clinton, Bowles negotiated the first balanced budget since 1969. President Barack Obama tapped Bowles to cochair, along with former Senator Alan Simpson, the National Commission on Fiscal Responsibility and Reform. In December 2010, the commission produced a report with a plan to reduce the US budget deficit by $4 trillion over the next 10 years.
The conference also featured concurrent panels of faculty members, alumni, and industry experts. One panel, “Asset Management in a World of Uncertain Risks,” featured Kent Daniel, professor of finance and economics; Robert Hodrick, the Nomura Professor of International Finance; Douglas R. Jamieson ’82, president and CEO, GAMCO Investors; Ann F. Kaplan ’77, chair of Circle Financial Group; and M. Suresh Sundaresan, the Chase Manhattan Bank Foundation Professor of Financial Institutions.
A second panel, “Corporate Finance in a World of Uncertain Valuations,” featured Laurie Hodrick, the A. Barton Hepburn Professor of Economics in the Faculty of Business; John Moon, managing director Morgan Stanley Capital Partners; Patricia Moraes ’95, co-head, Investment Banking, Brazil, J.P. Morgan; Prem Parameswaran ’95, managing director, Deutsche Bank Securities; and Daniel Wolfenzon, the Stefan H. Robock Professor of Finance and Economics. Both panels and the keynote address invited questions from the audience.
“I am so grateful to the speakers for making the inaugural conference a great success,” said Laurie Hodrick, founding director of the Program for Financial Studies. “I am already looking forward to next year’s schedule.”
The Program for Financial Studies, which recently celebrated its one-year anniversary, is governed by an 18-member executive advisory board and a seven-member academic advisory board that ensure that the program delivers seminal research, relevant curriculum, and engaging events. The program bridges theory and practice by supporting a broad spectrum of initiatives, engaging the School’s faculty members in cross-disciplinary discussions and activities with students, alumni, and external constituents.